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Company influence on foreign aid disbursement: Is conditionality credible when donors have mixed motives?

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  • Espen Villanger

Abstract

When donors enforce conditionality upon recipients who do not implement the conditions, companies can suffer from cancellation of their contracts with the recipient when aid dries up. A strategic recipient may avoid implementing controversial conditions by only granting a contract to a company that puts pressure on the donor to keep aid flowing. In our model, each of these three agents takes account of each of the two other agents' actions. We show that this triadic structure can be crucial when explaining recipients' use of companies to influence donors to give aid unconditionally, and offer a time-consistent explanation for the failure of conditionality.

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Bibliographic Info

Paper provided by CMI (Chr. Michelsen Institute), Bergen, Norway in its series CMI Working Papers with number WP 2003:4.

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Length: 33 pages
Date of creation: 2003
Date of revision:
Handle: RePEc:chm:wpaper:wp2003-4

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Keywords: Triadic Foreign aid Credibility Fungibility Samaritan's dilemma;

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References

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  1. Trumbull, William N & Wall, Howard J, 1994. "Estimating Aid-Allocation Criteria with Panel Data," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 104(425), pages 876-82, July.
  2. Odd-Helge Fjeldstad, 2002. "The fight against corruption and the role of parliamentarians," CMI Working Papers, CMI (Chr. Michelsen Institute), Bergen, Norway WP 2002:6, CMI (Chr. Michelsen Institute), Bergen, Norway.
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  7. Svensson, Jakob, 1998. "Foreign aid and rent-seeking," Policy Research Working Paper Series 1880, The World Bank.
  8. Odd-Helge Fjeldstad, 2002. "Fighting fiscal corruption: The case of the Tanzania Revenue Authority," CMI Working Papers, CMI (Chr. Michelsen Institute), Bergen, Norway WP 2002:3, CMI (Chr. Michelsen Institute), Bergen, Norway.
  9. Summers, Lawrence H & Pritchett, Lant H, 1993. "The Structural-Adjustment Debate," American Economic Review, American Economic Association, American Economic Association, vol. 83(2), pages 383-89, May.
  10. Dollar, David & Svensson, Jakob, 1998. "What explains the success or failure of structural adjustment programs?," Policy Research Working Paper Series 1938, The World Bank.
  11. Burnside, Craig & Dollar, David, 1997. "Aid, policies, and growth," Policy Research Working Paper Series 1777, The World Bank.
  12. Jan Isaksen, 2002. "Energy cooperation in Southern Africa: What role for Norway?," CMI Working Papers, CMI (Chr. Michelsen Institute), Bergen, Norway WP 2002:4, CMI (Chr. Michelsen Institute), Bergen, Norway.
  13. Alberto Alesina & David Dollar, 1998. "Who Gives Foreign Aid to Whom and Why?," NBER Working Papers 6612, National Bureau of Economic Research, Inc.
  14. Ussif Rashid Sumaila & Joseph Apaloo, 2002. "A selected survey of traditional and evolutionary game theory," CMI Working Papers, CMI (Chr. Michelsen Institute), Bergen, Norway WP 2002:7, CMI (Chr. Michelsen Institute), Bergen, Norway.
  15. Hansen, Henrik & Tarp, Finn, 2001. "Aid and growth regressions," Journal of Development Economics, Elsevier, Elsevier, vol. 64(2), pages 547-570, April.
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  19. Ivar Kolstad, 2003. "The evolution of social norms," CMI Working Papers, CMI (Chr. Michelsen Institute), Bergen, Norway WP 2003:1, CMI (Chr. Michelsen Institute), Bergen, Norway.
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Citations

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Cited by:
  1. Odd-Helge Fjeldstad, 2003. "What has trust got to do with it? Non-payment of service charges in local authorities in South Africa," CMI Working Papers, CMI (Chr. Michelsen Institute), Bergen, Norway WP 2003:12, CMI (Chr. Michelsen Institute), Bergen, Norway.
  2. Odd-Helge Fjeldstad & Florida Henjewele & Geoffrey Mwambe & Erasto Ngalewa & Knut Nygaard, 2004. "Local government finances and financial management in Tanzania," CMI Working Papers, CMI (Chr. Michelsen Institute), Bergen, Norway WP 2004: 7, CMI (Chr. Michelsen Institute), Bergen, Norway.
  3. Mavrotas, George & Villanger, Espen, 2006. "Multilateral Aid Agencies and Strategic Donor Behaviour," Working Paper Series, World Institute for Development Economic Research (UNU-WIDER) DP2006/02, World Institute for Development Economic Research (UNU-WIDER).
  4. Basu, Kaushik, 2014. "Fiscal policy as an instrument of investment and growth," Policy Research Working Paper Series 6850, The World Bank.
  5. Villanger, Espen, 2006. "Company interests and foreign aid policy: Playing donors off against one another," European Economic Review, Elsevier, Elsevier, vol. 50(3), pages 533-545, April.
  6. Espen Villanger, 2004. "Powerful donors and foreign policy: The role of multilateral financial institutions," CMI Working Papers, CMI (Chr. Michelsen Institute), Bergen, Norway WP 2004: 12, CMI (Chr. Michelsen Institute), Bergen, Norway.
  7. Espen Villanger, 2003. "Company interests and foreign aid policy: Playing donors out against each other," CMI Working Papers, CMI (Chr. Michelsen Institute), Bergen, Norway WP 2003:5, CMI (Chr. Michelsen Institute), Bergen, Norway.
  8. Kilby, Christopher, 2005. "World Bank lending and regulation," Economic Systems, Elsevier, Elsevier, vol. 29(4), pages 384-407, December.
  9. Pincin, Jared, 2013. "Political power and aid tying practices in the development assistance committee countries," MPRA Paper 49806, University Library of Munich, Germany.
  10. Ruxanda Berlinschi, 2010. "Reputation concerns in aid conditionality," The Review of International Organizations, Springer, Springer, vol. 5(4), pages 433-459, December.

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